Tracking the tax form trail
Tax Carnival #8: Stocking Stuffers

I don't remember checking that "opt in" box

The IRS has decided it's time to make a few extra bucks using our personal data.

The tax agency has announced that tax year 2002 and 2004 filing statistics, sorted by Zip Codes, are now for sale. You can pay $25 for a single state or $500 for info on taxpayers across the entire country. 

Tax_info_for_sale1_2 You'll be able to see, among other things, how many total returns, by income range, were filed where you live, how much in taxes was collected from you and your neighbors, how much was from self-employment income reported on Schedule C, how many of your neighbors opted to itemize via Schedule A rather than claim the standard deduction, how many got hit by the alternative minimum tax, just how charitable folks are in your neck of the woods, and even the number of filers in your Zip Code who paid a preparer to file their forms. 

The exact categories, displayed in Excel spreadsheet format, are slightly different for each available tax year, with the tax data broken down more in 2004 than in 2002. For illustrative purposes, the IRS has made one North Dakota Zip Code's data available (no, which one is not specified in the example). You can see a sample of 2002 data here and 2004 stats here.

Hassle factor hike: OK, this is not a huge privacy risk, as there will be no specific, individual connections to taxpayers in the Zip Code collections. And true, the IRS has always acknowledged that it uses general filing data to study and understand taxpayer trends.

But in the past, this information has been available for free. Now, in addition to taking my tax money and using it for my government's purposes (whether I agree with those purposes or not, but that's another issue), it's using me and my filing information to make more money.

I didn't even get to say count me and my tax statistics in or out of this deal, an option I usually get from other entities when they want to sell my data to telemarketers. And you know that sales groups across the U.S. are already planning their various assaults on neighborhoods based on the adjusted gross income figures.

I understand that the IRS has been fighting a largely losing battle with Congress when it comes to the tax agency's annual budget. But instead of continuing to make a solid case for why the agency needs sufficient funding, it has apparently decided to sell itself. And you and I and all 132 million other taxpayers who file returns are unasked silent partners.

Another swipe at Uncle Sam: What really bothers me about this move is that it's one more step in the privatization direction. A group of politicians, policy makers, lobbyists and associated think tanks and political action committees have long been pushing for the dismantling of the U.S. government and replacing the services with private firms. A key part of this plan is to "starve the beast," a theory which contends that lower taxes will force Congress to cut spending.

Yeah, like that's been working.

Despite the cuts initiated since Dubya et all took over, the Washington machine has grown beyond control, both in raw dollar amounts as well as a bureaucracy bloated by the creation of new agencies to do jobs that already were working. Remember when FEMA was able to operate without going through Homeland Security?

And even the IRS, with its controversial hiring this year of private debt collectors to bring in unpaid tax bills, acknowledges that it could do the same job in-house at less cost. But no, say the starve the beast types, government is bad and industry is good so push on regardless of what the evidence might show.

The anti-gov'ment folks have a fall-back excuse for why the federal bureaucracy has actually grown while they and their cohorts have been in control. They point to the unexpected costs of Iraq and Katrina. But that rationalization actually undercuts their basic argument.

Government and private industry are two separate animals, to keep with the creature analogy, and each has a place in the economy. The private sector's main goal, however, is to make a profit, often at the expense of what's best for the "customers," who happen to be you and me, whereas a government's primary reason for existence is to provide necessary social and political services for its citizenry.

The type and amount of services is always up for debate and refinement. But the mechanism to deliver it should be a government paid for by the people and working for the people and their interests. Not a company that is looking primarily for the best way to put more bucks in management's and shareholder's pockets.

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